Agenda item - Payment of Housing Association Grant to East Thames

(Housing Portfolio Holder) To consider the attached report (C-060-2016/17).

(Housing Portfolio Holder) To consider the attached addendum report (C-060a-2016/17).

(1) That the successful outcome of East Thames’ bid for funding to the Homes and Communities Agency (HCA) for its affordable housing development at Knolly’s Nursery, Waltham Abbey be noted and that, as a result, it be further noted that East Thames had reluctantly advised the Council that it was unable to accept any grant from the Council, funded by “one-for-one replacement” Right to Buy capital receipts (“141 Receipts”), for this development;

(2) That the consequential requirement for the Council to pay to the Department of Communities and Local Government (DCLG) unspent 1-4-1 Receipts that have to be spent by 31 March 2017 (currently estimated at £350,000), with interest, be noted;

(3) That, in view of the continuing moratorium placed by the Cabinet on the Council Housebuilding Programme, the 1-4-1 Receipts previously paid “temporarily” and voluntarily to the DCLG from Quarters 1 and 2 of 2016/17, totalling £1.676million, continue to be retained temporarily by the DCLG until either;

(a) The Council has undertaken Stage 1 of its Further Housing Revenue Account Financial Options Review and, in particular, determined the future of its Housebuilding Programme; or

(b) The DCLG allocates the Council’s 1-4-1 Receipts elsewhere for other purposes, as recently indicated by DCLG officials;

whichever is the earliest; and

(4) That the Stage 1 Further Housing Revenue Account Financial Options Review be undertaken as soon as possible, in line with the process previously determined by the Cabinet.

The Housing Portfolio Holder presented a report concerning the potential payment of Housing Association grant to East Thames Housing Association.

The Portfolio Holder explained that the original report on this issue within the main agenda described a proposal for the Council to provide East Thames with grant towards the development costs for their affordable housing development at Knolly’s Nursery, Waltham Abbey. One of the benefits to the Council under the proposed arrangements would be that, in return, East Thames would purchase five properties from the open market and convey them to the Council without charge. However, the report also explained that East Thames had made a bid to the Homes and Communities Agency (HCA) for grant towards their development costs, on which a decision from the HCA was expected on 23 January 2017. If East Thames’ bid was successful, then they would not be able to enter into the proposed legal agreement with the Council. It was therefore stated that, in such an event, a supplementary report would be provided to the Cabinet on the outcome and the implications.

The Portfolio Holder stated that East Thames had now informed the Council that its funding bid to the HCA had been successful and that, regrettably, they were now unable to enter into the proposed legal agreement with the Council. Therefore, the Council had little choice now but to accept that it was unlikely the unspent 1-4-1 Receipts would be spent by 31 March 2017 (currently estimated at £350,000) and would have to be paid over to the Department of Communities & Local Government (DCLG), with interest, at the end of the current Quarter. Moreover, it was now recommended that the 1-4-1 Receipts previously paid “temporarily” and voluntarily to the DCLG from Quarters 1 and 2 of 2016/17 should continue to be retained temporarily by the DCLG - until either the Council had undertaken Stage 1 of its Further Housing Revenue Account (HRA) Financial Options Review or the DCLG had allocated the Council’s 1-4-1 Receipts elsewhere for other purposes, whichever occurred the earliest. The first draft Stage 1 report of the Further HRA Financial Options Review was expected to be completed at the end of January 2017 and the final report would be reported to the Finance and Performance Management Cabinet Committee, following consultation with the Communities Select Committee and the Tenants & Leaseholders Federation as previously requested by the Cabinet.

Cllr Bassett stated that Councils were finding it virtually impossible to spend their 1-4-1 Receipts, and quoted the situation at Stevenage Borough Council as a further example of this. Cllr Bassett proposed that the Council should write to the DCLG to request the removal of conditions regarding the spending of 1-4-1 Receipts. The Housing Portfolio Holder informed the Cabinet that representations had been made to the Local Government Association regarding this issue, and the Assistant Director of Communities (Housing Property) stated that Officers had made those points directly to the DCLG.

In respect of any other options considered, and specifically the premium received by the Council from the development of the former Golden Lion Public House site in Loughton, the Assistant Director reminded the Cabinet that this premium was actually a Section 106 contribution, one of many received by the Council, and all such monies had been spent. The Council was partnering with Linden Limited for the purchase of affordable housing at Barnfield in Roydon.

The Assistant Director reminded the Cabinet that these 1-4-1 Receipts had to be spent within three years of receipt, and the Council had simply run out of time on this occasion. The Portfolio Holder also reminded the Cabinet that 1-4-1 Receipts could only be used for a maximum of 30% of the cost to build new houses, with the remaining 70% to be found from other sources. The Leader of Council stated that Officers had worked extremely hard to spend these receipts in time, and the Finance Portfolio Holder confirmed that the recommendations were correct and proper from a Financial point of view.

Decision:

(1) That the successful outcome of East Thames’ bid for funding to the Homes and Communities Agency (HCA) for its affordable housing development at Knolly’s Nursery, Waltham Abbey be noted and that, as a result, it be further noted that East Thames had reluctantly advised the Council that it was unable to accept any grant from the Council, funded by “one-for-one replacement” Right to Buy capital receipts (“1-4-1 Receipts”), for this development;

(2) That the consequential requirement for the Council to pay to the Department of Communities and Local Government (DCLG) unspent 1-4-1 Receipts that have to be spent by 31 March 2017 (currently estimated at £350,000), with interest, be noted;

(3) That, in view of the continuing moratorium placed by the Cabinet on the Council Housebuilding Programme, the 1-4-1 Receipts previously paid “temporarily” and voluntarily to the DCLG from Quarters 1 and 2 of 2016/17, totalling £1.676million, continue to be retained temporarily by the DCLG until either;

(a) The Council has undertaken Stage 1 of its Further Housing Revenue Account Financial Options Review and, in particular, determined the future of its Housebuilding Programme; or

(b) The DCLG allocates the Council’s 1-4-1 Receipts elsewhere for other purposes, as recently indicated by DCLG officials;

whichever was the earliest; and

(4) That the Stage 1 Further Housing Revenue Account Financial Options Review be undertaken as soon as possible, in line with the process previously determined by the Cabinet.

Reasons for Decision:

The Council was hoping to enter into a legal agreement with East Thames to provide them with grant towards the development costs for their affordable housing development at Knolly’s Nursery, Waltham Abbey. However, the Council had recently been advised that their separate bid to the HCA was successful and, since this would be a much more beneficial arrangement for East Thames than could be offered by the Council, it was no longer possible to pursue the proposed arrangement with East Thames.

Therefore, the unspent 1-4-1 Receipts from Quarter 3 would need to be returned to the DCLG.

Other Options Considered and Rejected:

To recover the 1-4-1 Receipts previously paid temporarily to the DCLG, to remove the risk of them being re-allocated by the DCLG to another organisation or programme that would result in the Council no longer having access to them. However, the reason the Cabinet decided that they should be paid over to the DCLG in the first place was in view of the moratorium it had placed on the Council Housebuilding Programme, and the possibility that the Stage 1 Further HRA Financial Options Review might result in the Housebuilding Programme being discontinued beyond the current Phase 3. In such an event, it would not be possible to utilise the increasing amount of unallocated 1-4-1 Receipts that had arisen, and would continue to arise, unless it was possible to provide them to a Housing Association as grant. Therefore, these unallocated 1-4-1 Receipts would have to be paid over to the DCLG at a later date, together with a punitive level of interest.

To lift the temporary moratorium placed on the Council Housebuilding Programme, in advance of decisions being made through the Stage 1 Further HRA Financial Options Review, and implement Phase 4, and possibly Phase 5, of the Council Housebuilding Programme as soon as possible, to utilise the currently unallocated 1-4-1 Receipts from Quarters 1 and 2 of 2016/17, together with further 1-4-1 Receipts that arise in future Quarters, up to the utilisation of 30% of the total development costs. However, the Leader of Council and Housing Portfolio Holder continued to consider that it would be imprudent to commit to any further phases of the Housebuilding Programme, until Members were able to consider all of the options for the future and all of the associated expenditure and funding implications through the Stage 1 Options Review, especially since it was likely that it would be necessary for the Council to defer the repayment of the earliest Public Works Loan Board loan that matured in 2019 for a couple of years in order to fund the other 70% of the housebuilding development costs.